When representing a client in a property dispute, may an attorney acquire an undivided
fee simple interest in the property as security for the payment of his fee?

Discussion

Disciplinary Rule 5-103 prohibits a lawyer from
acquiring "a proprietary interest in the cause of action or subject matter of
litigation he is conducting for a client." However, DR 5-103
provides that a lawyer may "acquire a lien granted by law to secure his fee or
expenses: or may "contract with a client for a reasonable contingent fee in a civil
case." The acquisition of an undivided fee simple interest in the property is
certainly not the acquisition of a lien, but it may constitute a contract for a reasonable
contingent fee in the case.

In State v. Baker, 539 S.W.2d 367 (Tex.Civ.App.Austin, 1976, writ ref'd
n.r.e.), an attorney purchased property on behalf of his client at a sheriff's sale, but
then he used the title on the property to secure compensation for himself without the
consent of his client. In deciding that the attorney violated DR 5-103, the Court said
that because of the nature of the relationship between an attorney and client, the
attorney is prohibited "from acquiring proprietary interests in the subject matter of
litigation in order to avoid the possibility of adverse influence upon the attorney and
harm to the client." Id. at 373. The attorney client relationship requires
that the attorney act in good faith. The attorney will not be liable for an error in
judgment if he acts in good faith and with an honest belief that his acts are in the best
interest of the client. Id. at 375. This case implies that the acquisition of the
property would not have been a violation of DR 5-103 if the attorney had acted in good
faith and notified the client.

In cases predating DR 5-103, a deed conveying land from a client
to his attorney was not void but voidable. Lesikar v. Lesikar, 251 S.W.2d 555
(Tex.Civ.App.Galveston 1952, writ ref'd n.r.e.). When the attorney and client relationship
exists at the time of the execution of the deed, the question of constructive fraud is
raised. Plummer v. Bradford, 395 S.W.2d 856 (Tex. Civ. App.Houston 1965, no
writ). The transaction is presumed unfair unless the attorney satisfies his burden of
showing "utmost good faith, a full and fair price, absence of pressure or influence
by virtue of the confidential relationship, and that no advantage was taken of his
client." Id.

Conclusion

If an attorney, when representing a client in a property dispute, acquires an undivided
fee simple interest in the disputed property in good faith and with the client's consent,
then there is no violation of DR 5-103. The attorney's
acquisition of an interest in the property is equivalent to contracting for a contingent
fee which is allowed by DR 5-103(A)(2).